Strategic Management Process

Strategic Management Process Remember, the first step is Strategy Formulation

What is our business mission? Who are our customers? What do our customers consider “value?” What have been our results? What is our plan?

The Strategic Management Process The second step is strategic implementation. This is where we divide up our resources and put strategies into action. “The future will not just happen if one wishes hard enough. It requires decision – now. It imposes risk-now. It requires action-now. It demands allocation of resources, and above all, of human resources-now. It requires work-now.”

Strategy Formulation – Creating Strategies Strategy Implementation – Putting Strategies into action Identify and analyze current: -Mission -Objectives -Strategies Analyze internal and external environments: -Organizational resources and capabilities (strengths and weaknesses) -Industry and external environment (opportunities and threats) Revise mission and objectives, select new strategies: -Corporate -Business -Functional Implement strategies: -Corporate governance -Management systems and practices -Strategic leadership Evaluate results: -Strategic control -Renew strategic management process

Five Strategic Management Task Summary 1. Identify organizational mission and objectives Ask: “What business are we in? Where do we want to go?” 2. Assess current performance compared to mission and objectives Ask: “How well are we currently doing? 3. Create strategic plans to accomplish purpose and objectives Ask: “How can we get where we really want to be?” 4. Implement the strategic plans. Ask: “Has everything been done that needs to be done?” 5. Evaluate results; change strategic plans and/or implementation processes as necessary. Ask: “Are things working out as planned? What can be improved?”

Analysis of Mission, Values, and Objectives This is the first step of the strategic management process. You have to look at all three of these things. The mission is the reason for the organization to exist in society. “What kind of difference does the company want to make? What do they want to be known for? These should be clear. Think about the ones you came up with. Starbucks aims to be “the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow”

Good Mission Statements They identify the domain that the organization wants to operate in. This includes: -The customers it intends to serve, the products/services it intends to provide, and the location it wants to operate in. -Should also communicate the philosophy that the company wants to work with. Think of the stakeholders. A good test of the mission is how well it serves the stakeholders.

Mission Communities Employees We respect the individuality of each employee…creativity and productivity are encouraged, valued, and rewarded Communities We are committed to being caring and supportive corporate citizens within the worldwide communities in which we operate. Mission Shareholders We are dedicated to…performing in a manner that will enhance returns on investments. Suppliers We think of our suppliers as partners who share our goal of…highest quality Customers We are committed to providing superior value in our products and services

Mission Statements Patagonia – “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis. Ikea – “Our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well- designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.” Enron – “Respect, Integrity, Communication, and Excellence.” Mission Statement Generator

Core Values Remember values? Strategic Management Processes have to think about values. Organizational Culture (we will talk about in a future unit) but it is the value system within a company. These things guide behaviour of the company.

What type of organizational culture fits you? PAUSE What type of organizational culture fits you?

Objectives Operating objectives are specific results that organizations try to accomplish. These are shorter-term targets that organizations want to achieve. Performance can be measured against these. (A lot easier than measuring against mission statements) They are:

Objectives Profitability – Producing at a net profit in business. Market share – Gaining and holding a specific market share Human talent – Recruiting and maintaining a high-quality workforce. Financial health – Acquiring capital; earning positive returns.

Objectives Cost efficiency – Using resources well to operate at low cost. Product quality – Producing high-quality goods or services. Innovation – Developing new products and/or processes Social responsibility – Making a positive contribution to society

Analysis of Organizational Resources and Capabilities To do this, we need to do SWOT analyses. Strengths, Weaknesses, Opportunities, and Threats. We must identify core competencies. These are strengths that the organization has or does very well, compared to their competitors. Usually, they are: -rare, expensive to copy, non-substitutable. -sources of competitive advantage.

SW…OT Analysis Strengths and Weaknesses are part of internal assessment. Strengths…what are some that a company could have? Manufacturing efficiency? Skilled workforce? Good market share? Strong financing? Superior Reputation?

SW…OT Analysis Weaknesses…what are some that the company could have? Outdated facilities? Inadequate R & D Obsolete technologies? Weak management? Past planning failures?

SW…OT Analysis Opportunities and Threats are part of external analysis. Opportunities…what are some that a company could have? Possible new markets? Strong economy? Weak market rivals? Emerging technologies? Growth of existing market?

Today’s News $4.5 billion in food sales $14.5 billion in food sales

SW…OT Analysis Threats…what are some that a company could have? New competitors? Shortage of resources? Changing market tastes? New regulations? Substitute products?

Michael Porter’s Five Forces Model Graduated from Princeton and Harvard Business School. He is the Chair of the Harvard Business School’s program that deals with new CEOs for large companies. He believes that the “external environment” is the most important thing to consider, because it has a big impact on competition.

Michael Porter’s Five Forces Model New Entrants Threat of potential new competitors Suppliers Bargaining power of suppliers Customers Bargaining power of buyers Industry Competition Rivalry among competing firms Substitute Products Threat of substitute products or services

Michael Porter’s Five Forces Model We have to have a good understanding of the environment. If there is intense rivalry with competitors, there are a lot of threats of new entrants, or substitute products and buyers and suppliers are powerful, we are in an unattractive industry. If there is less competition, few threats, and suppliers and buyers do not have a lot of power to bargain, we are in an attractive industry.